Health Insurance in India still remains an untapped market

In a country where less than 15 per cent of population has some form of health insurance coverage, the potential for the health insurance segment remains high. It seems that there is an urgent need to ramp up the health insurance coverage in the country as out–of–pocket payments are still among the highest in the world.

Furthermore, according to the statistics of the World Health Organization (WHO), in 2011, India has spent only 3.9 per cent of gross domestic product (GDP) on the health sector which is the lowest amongst the BRICS (Brazil, Russia, India, China, South Africa) member countries pack.

Moreover, amongst the BRICS nations, in 2011, Russia’s out–of–pocket expenses stood highest at 87.9 per cent closely followed by India (86 per cent), China (78.8 per cent), Brazil (57.8 per cent), and South Africa (13.8 per cent). On the other hand, these expenses in developed economies of US and UK were comfortably poised at 20.9 per cent and 53.1 per cent respectively.

High out–of–pocket expense is exactly the reflection of low health insurance coverage in India. Sudip Bandyopadhyay, President, Destimoney Securities, opined, "We don’t have the insurance to cover and thus we end up paying from our own pockets. Once the penetration of health insurance increases, out of pocket payments will come down. In US and all, health insurance coverage is around 80 per cent."

Reasoning out the low health insurance coverage in India, Antony Jacob, CEO, Apollo Munich Health Insurance, said, "Only about 12–13 per cent of population has some form of health insurance coverage, including those who are covered through some form of government schemes. People are yet to accept health insurance as a financial tool for medical emergencies. They usually procrastinate when it comes to buying health insurance unless they are faced by a challenging situation."

Although the Indian health insurance market still lags behind other countries in terms of penetration yet the health insurance segment is rising. It continues to be one of the most rapidly growing sectors in the Indian insurance industry with gross written premiums for health insurance increased by 16 per cent from Rs 13,212 crore in 2011–12 to Rs 15,341 crore in 2012–13. The health insurance premium has registered a compounded annual growth rate (CAGR) of 32 per cent for the past eight financial years.

Health insurance segment still remains an unexplored territory in India. Jacob at Apollo Munich Health Insurance asserted, "Health insurance has become one of the most prominent segments in the insurance space today and is expected to grow significantly in the next few years. As spending on healthcare in India is expected to double in a couple of years, we believe that health insurance will eventually become the biggest contributor in the non–life segment."

Furthermore, in the present scenario, the health insurance industry is dominated by four public sector entities (National, New India, Oriental, and United India) that together have 60 per cent market share. The rest of the share is with 17 private sector players, of which four are standalone health insurance players (Star Health, Apollo Munich, Max Bupa, and Religare Health). ICICI Lombard continued to be the largest private sector non–life insurance company, with market share of 9.74 per cent.

Standalone health insurers have got a boost by the move taken by Insurance Regulatory and Development Authority (IRDA) in early 2013. Bandyopadhyay averred, "Few months back, IRDA has classified health insurance as a separate category and has permitted the insurers to tie–up with banks. All the four exclusive health insurance companies will be tying with the banks across the country and that will help them to move to the next level. The penetration of health insurance is now expected to increase with banks pushing for it through bancassurance tie–up."

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